Swiss Voters May Rein in Bosses’ Pay in ‘Fat Cat’ Ballot

Nearly two thirds of Swiss voters plan to back the “anti-fat cat” initiative in a March 3 referendum that would allow a binding annual shareholder vote on executive compensation for listed firms and block big payouts for new hires and for managers when they leave. Photographer: Valentin Flauraud/Bloomberg

March 1 (Bloomberg) -- Swiss voters will probably give
shareholders some of the world’s strongest powers to determine
the pay of top executives, a plan opponents say will make
Switzerland less attractive to big corporations.

Nearly two thirds of voters plan to back the “anti-fat
cat” initiative in a March 3 referendum that would allow a
binding annual shareholder vote on executive compensation for
listed firms and block big payouts for new hires and for
managers when they leave. Executives who break the rules could
face fines and jail. A Feb. 20 survey by the gfs.bern polling
institute saw 64 percent of voters backing the measure, with 27
percent opposing it.

Governments across Europe are considering limits to manager
compensation after using taxpayer money to aid banks and
corporations during the financial crisis. If successful, the
measure would make Swiss shareholders among the most powerful in
determining the bosses’ paychecks, among them Joe Jimenez and
Paul Bulcke, who head Novartis AG and Nestle SA.

“People are allergic to this shift towards an Anglo-Saxon
pay culture,” said Michael Hermann, a political scientist at
the University of Zurich. “Not only the social-democratic left,
but also conservative voters from the countryside and small
towns don’t like it.”

Payout Scrapped

The Abzockerinitiative -- German for fat-cat initiative --
has dominated Swiss media coverage in the past months.
Novartis’s plan to pay outgoing chairman Daniel Vasella as much
as $78 million to prevent him from working for rival companies
added fuel to the fire. In response to public ire, Europe’s
biggest drugmaker scrapped the accord last week.

Popular initiatives are commonplace in Swiss politics, on
issues ranging from health care to European Union membership. At
least 100,000 signatures are needed for an initiative to come up
for a national ballot. Voters repeatedly have taken a pro-business view in referendums about taxes. Last year, they also
rejected a proposal for six weeks of statutory vacation.

How much executives take home was called into question in
Switzerland after the country’s biggest bank, UBS AG, had to be
bailed out in 2008. The matter also touches on the issue of
immigration. Foreign managers -- among them Credit Suisse Group
AG Chief Executive Officer Brady Dougan -- can receive huge
sums, while nurses, hotel staff and construction workers
complain immigrants are willing to do their jobs for less.

At least five of Europe’s 20 highest-paid CEOs work for
Swiss companies, according to data compiled by Bloomberg. Among
them are the Americans Dougan, ABB Ltd.’s Joe Hogan and Jimenez
of Novartis. Roche Holding AG’s Austrian chief Severin Schwan
and Nestle’s Bulcke of Belgium are also in the top tier.

Strict Rules

Polls close at midday on March 3, though most voters cast
their ballot by mail before then. The government will announce
the result late in the day. If the measure succeeds, the Swiss
will have stiffer rules than Germany or Britain. U.K. public
companies will have to give shareholders binding votes on
executive pay every three years, Business Secretary Vince Cable
said in June.

The initiative was started by Thomas Minder, managing
director of a company making herbal toothpaste, who blames
highly-paid executives for the financial crisis. Minder says big
payouts highlight the gap between corporate chiefs and the
average wage earner.

Critics of the initiative say it would make Switzerland
less appealing to multinationals such as offshore drilling
contractor Transocean Ltd. and oilfield service company
Weatherford International Ltd., which moved to the Alpine nation
to take advantage of a low tax rate.

‘Criminalize Society’

“It would criminalize society,” Nestle CEO Bulcke told
Blick newspaper in a Feb. 15 interview. “Clearly, in the longer
term it will make Switzerland less attractive for entrepreneurs
and managers.”

Business lobby Economiesuisse has also warned that passing
Minder’s measure will drive out tax-paying companies. It favors
a less stringent counter proposal.

If voters back the curbs as expected, the government will
have to amend national laws. That process of implementation will
likely prove complicated, given that the various parties in
parliament disagree about the pay limits: While the Social
Democrats support Minder’s plan, the pro-business Free Democrats
are against it.